Market sentiment has become shaky as investors pull out of emerging markets now that the Fed has started to scale back its bond buying program. That has boosted the yen, as some investors look to relocate their money in traditional safe havens.

The currency has gained more than 3% against the dollar since hitting a 5-year low of 105.4 last month. That's bad news for Japanese shares as it makes it more challenging for exporters to sell goods.

Local issues may also be contributing. Aggressive monetary policy and additional government spending have begun to lift Japan out of 15 years of stagnation, but investors want to see Prime Minister Shinzo Abe deliver promised economic reforms.

Growth has picked up, although a surprise slowdown in the third quarter of last year served as a warning that without major reforms, the early success could fade. And inflation is still only half the central bank's 2% target.